Housing crash deniers ???

[Greg R.]

Unfortunately I've been away for a few months while taking care of some personal matters, so I haven't been able to keep up on discussions. 

However, several months ago there were ample amount of folks here insisting that a market crash/ correction was impossible and that prices would only continue to increase.

Curious if there are still people out there who feel this way? If so, I'd love to see some data that supports your view that the market isn't going to crash/ correct. 

[Carlos Ptriawan]

Quote from @John Carbone:

Quote from @James Hamling:

 What's funny was in 2017/2018 I plan to buy RV out of Craiglist I found one NASA guy sleeping in RV LOL he has so many custom sophisticated RV with lot of solar panels and electrial everything, he said his modification costs him more than 30 grands, I said to him if you just wanna buy house little bit farther away you could get a decent one and use that money towards downpayment instead :)

[Carlos Ptriawan]

ZILLOW NOVEMBER DATA IS OUT

San Jose/San Diego/California is stabilizing. The average price is regressed to Q1 2022 only. The east bay area is ticking up.

The worst is now Austin,TX which regressed to Q4 2021 level. The price is still moving down, same with Vegas. Greg is correct at some points.

Phoenix also dropped, but not that much.

Wow it seems a duplicate of 2008, CA crashed the first but recover very early too.

Craziest is Maui county and Hawaiian county, price is sloping upward with 20% YoY expected appreciation, but Honolulu is sloping down , so even between island the appreciation is vastly different LOL

Crazy how Zillow has helped me in the last 10 years.

[Jay Thomas]

Nowadays, banks have become a lot more careful. The majority of mortgages are much more conservative and require substantial equity upfront. This means that any potential downturn won't be nearly as bad as before - people will still have enough money to sell and move on without suffering great losses. This helps stabilize the market and it is why I remain confident that there won't be a crash. It's not just about avoiding a collapse; this equity also provides security for homeowners who would otherwise be vulnerable to greater risks. In short, the future is looking bright thanks to the increased levels of equity in the market!

We saw what happened the last time people were allowed to buy homes with no money down, and it wasn't pretty. With higher levels of equity today, I believe that the market is in a much better place than it was back then. This gives us all greater confidence in our investments and helps create a strong foundation for future growth. Here's hoping for continued success!

Let's hope it continues.

This economic certainty is something that we all should be grateful for and take advantage of, so don't miss the opportunity to invest! After all, in a market with high equity levels, any potential correction will leave plenty of room for growth - so why not get ahead and make the most out of this great situation? It could be the best decision you make.

[John Carbone]

Quote from @Carlos Ptriawan:

ZILLOW NOVEMBER DATA IS OUT

San Jose/San Diego/California is stabilizing. The average price is regressed to Q1 2022 only. The east bay area is ticking up.

The worst is now Austin,TX which regressed to Q4 2021 level. The price is still moving down, same with Vegas. Greg is correct at some points.

Phoenix also dropped, but not that much.

Wow it seems a duplicate of 2008, CA crashed the first but recover very early too.

Craziest is Maui county and Hawaiian county, price is sloping upward with 20% YoY expected appreciation, but Honolulu is sloping down , so even between island the appreciation is vastly different LOL

Crazy how Zillow has helped me in the last 10 years.

 What do you see on Sevier county tennessee?

[Carlos Ptriawan]

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

ZILLOW NOVEMBER DATA IS OUT

San Jose/San Diego/California is stabilizing. The average price is regressed to Q1 2022 only. The east bay area is ticking up.

The worst is now Austin,TX which regressed to Q4 2021 level. The price is still moving down, same with Vegas. Greg is correct at some points.

Phoenix also dropped, but not that much.

Wow it seems a duplicate of 2008, CA crashed the first but recover very early too.

Craziest is Maui county and Hawaiian county, price is sloping upward with 20% YoY expected appreciation, but Honolulu is sloping down , so even between island the appreciation is vastly different LOL

Crazy how Zillow has helped me in the last 10 years.

 What do you see on Sevier county tennessee?

 Stabilizing the price within Q1-Q2 2022 price level. But the condo price seems more stable than SF. 

Btw Kauai county seems like having the price action chart during the gamma squeeze hahaha which millionare bought properties there in the last two years lol

[Carlos Ptriawan]

Quote from @Jay Thomas:

Nowadays, banks have become a lot more careful. The majority of mortgages are much more conservative and require substantial equity upfront. This means that any potential downturn won't be nearly as bad as before - people will still have enough money to sell and move on without suffering great losses. This helps stabilize the market and it is why I remain confident that there won't be a crash. It's not just about avoiding a collapse; this equity also provides security for homeowners who would otherwise be vulnerable to greater risks. In short, the future is looking bright thanks to the increased levels of equity in the market!

biggerpocket community is partly responsible for 2008 crash as folks here advising people to buy the property with no money down/OPM even to this day :) :) and then they call it creative financing.

[Joseph Henry]

Quote from @Carlos Ptriawan:

ZILLOW NOVEMBER DATA IS OUT

San Jose/San Diego/California is stabilizing. The average price is regressed to Q1 2022 only. The east bay area is ticking up.

The worst is now Austin,TX which regressed to Q4 2021 level. The price is still moving down, same with Vegas. Greg is correct at some points.

Phoenix also dropped, but not that much.

Wow it seems a duplicate of 2008, CA crashed the first but recover very early too.

Craziest is Maui county and Hawaiian county, price is sloping upward with 20% YoY expected appreciation, but Honolulu is sloping down , so even between island the appreciation is vastly different LOL

Crazy how Zillow has helped me in the last 10 years.

How trustworthy is Zillow? SF lost 20% yoy. San Jose lost 15% since last year.

[Carlos Ptriawan]

Quote from @Joseph Henry:

Quote from @Carlos Ptriawan:

ZILLOW NOVEMBER DATA IS OUT
Crazy how Zillow has helped me in the last 10 years.

How trustworthy is Zillow? SF lost 20% yoy. San Jose lost 15% since last year.

That's not the way I read it, I read it from the price chart slope and analyze it using long-term appreciation line.

San Francisco is still crashing back to the 2018-2019 level.
San Jose already rebound to Q4 2021/Q1 2022 price level with much more stability. Peak to bottom is about 8-9% now. 

There're houses where it dropped even 35% YoY but that's on 2 mil 4-5BR houses as result of overbidding, but all these houses makes the statistics becomes more chaotic.

In average , YoY for San Jose for middle class family between 2021 to EOY 2022 level is between 0 to -5%. It's like 2022 never exists.

[Carlos Ptriawan]

I've checked sold listing as well, there are huge customer sentiment changes in San Jose right now. Few TLC houses are sold above the asking price and also above the long-term appreciation line. While a well-renovated house moves to the top 5% of the high range/higher than LT appreciation.
It seems the market is already back to normal due to extremely low inventory and ARM is reaching 5%-ish.

I plan to sell and buy in 2023. The market recovers very fast here just like in 2008.

[Harsh Thakker]

Personally, whether or not there is a price correct is, IMO, significantly less important than the volume of trading that occurs at those corrected prices.

If median prices drops 20% but transaction volume and available inventory drops 40%, then the number of investors who will be able to benefit from the crash and the window of opportunity to take advantage of price correction is extremely limited. And the only people who "lose their shirt" in such a scenario and exit the market entirely, are people who are forced to sell within that limited window. 

For investors, they may be forced to sell if they lose cashflow or ability to service debt (rent drops, property goes vacant longer-term, or they planned on flipping it and do not have the reserves to keep paying interest). For homeowners, forced selling really only happens if they can no longer afford the payment, which only really happens when they lose their job and cannot find another one in time. 

Now, homeowner credit profiles have essentially never been better, and most of them have locked in low rates, and make over $100,000+ per year. The risk of forced selling there only happens if there is significant, sustained job loss in well-paying sectors of the economy (which typically tend to be more stable, especially with the current labor market and general employer need for long-term talent retention to avoid brain drain with an aging and less productive population). So there likely is not going to be a rash of homeowner foreclosures flooding the market. Homeowners don't sell at a loss just because of fear of the market dropping; generally they didn't buy they home because they thought it was an amazing deal but because they needed somewhere to live, they and their families liked the location, property, etc, and they can afford the fixed monthly payment.

Investors, on the other hand, are more likely to be forced sellers in the coming years, especially those who bought improperly. A renter who loses their job has very little switching costs for moving properties compared to a homeowner, and with more multifamily inventory coming online or economic hardship pushing homeowners to rent out extra rooms, etc, rents are likely to soften in the event of further economic distress. But, in most markets, investors barely make up single-digit % proportions of total sales. In 2021, however, nationwide investors have made up 24% of the single-family housing sold, so that's a more substantial portion. In some markets, the proportion is likely even higher than that, especially those that are extremely investor heavy. These are the markets in which I expect the largest declines.

However, overall, this brings us back to the data suggesting that, while there may be a price correction, the amount of product that will be available for purchase at those corrected prices before the market recovers is likely to be low, maybe even below 10-20% of total inventory.

[Kevin Maher]

https://fortune.com/2022/12/28...   Please read this article in Fortune magazine.  It spells out the coming housing crash by the feds.  They fully intend to crash the housing market to fix inflation.  There is something that you don't see talked about that is in this article is the hidden unfinished house inventory.  These houses are typically listed by the time they pull a permit but they have been holding inventory back off the market since the 2020 at least in order to capture all the appreciation they can.  This will all be on the market in the next 3 to 4 months probably.  The carrying cost of construction has got to be killing the builders with inventory languishing.  People are backing out of deals and walking.  By end of 2023 builders will stop building.  Layoffs will happen.  Houses will start going back to the banks from builders.  The typical consumer can not afford a house and they have less every day for house due to the higher prices on everything.  They have to buy food, fuel, clothes, so rents will have to come down as well.  Which is what the feds want.  As they say in the stock market don't fight the feds.  Good luck to everybody even the ones that dislike my opinion.

[Carlos Ptriawan]

 Good point.
So I shared the data a few weeks ago from Sacramento Appraisal that's very genius, he plotted within a chart the relative percentage compare of sold houses to the listing price. So we know now that majority of sold houses are still within 5% of the listing price.

However, there're minorities in those houses, maybe 15-20% , that were sold within -30% range.

When I see local Zillow listings with typical "TLC" keywords, there are house that are sold hitting the sold price, but there are also those that it just sold way way below the market. And it seems it's a good buying opportunity to identify that houses.

I see for example, in 1.6m neighborhood, one house is sold for 1.1, it's fixer upper.

[Harsh Thakker]

Quote from @Kevin Maher:

https://fortune.com/2022/12/28...   Please read this article in Fortune magazine.  It spells out the coming housing crash by the feds.  They fully intend to crash the housing market to fix inflation.  There is something that you don't see talked about that is in this article is the hidden unfinished house inventory.  These houses are typically listed by the time they pull a permit but they have been holding inventory back off the market since the 2020 at least in order to capture all the appreciation they can.  This will all be on the market in the next 3 to 4 months probably.  The carrying cost of construction has got to be killing the builders with inventory languishing.  People are backing out of deals and walking.  By end of 2023 builders will stop building.  Layoffs will happen.  Houses will start going back to the banks from builders.  The typical consumer can not afford a house and they have less every day for house due to the higher prices on everything.  They have to buy food, fuel, clothes, so rents will have to come down as well.  Which is what the feds want.  As they say in the stock market don't fight the feds.  Good luck to everybody even the ones that dislike my opinion.

I sell lots directly to homebuilders, and also build my own new construction homes. Even in the current market, I am seeing builders still easily making 8-10% plus margin on costs. Also, not one builder that I know has stopped buying lots, though all are of course more cautious.

Builders, and especially large regional and national homebuilders, do not use the same kind of financing as even most developers. These are generally large corporate structures or publicly traded companies that have the ability to raise debt and bond financing in the capital markets at or near short term lending levels, and for those that are especially creditworthy and have strong lending ties, they may even still be in the low 4's for construction interest rates (not unheard of, even in this market, for truly prime borrowers). Additionally, interest is typically only accrued on drawn capital so unless and until the home is fully complete it won't be accruing much carrying cost (land is hardly ever financed, and of the major builders only a handful engage in speculative building and would have finished houses without an end contract).

[Carlos Ptriawan]

Quote from @Harsh Thakker:

Quote from @Kevin Maher:

https://fortune.com/2022/12/28...   Please read this article in Fortune magazine.  It spells out the coming housing crash by the feds.  They fully intend to crash the housing market to fix inflation.  There is something that you don't see talked about that is in this article is the hidden unfinished house inventory.  These houses are typically listed by the time they pull a permit but they have been holding inventory back off the market since the 2020 at least in order to capture all the appreciation they can.  This will all be on the market in the next 3 to 4 months probably.  The carrying cost of construction has got to be killing the builders with inventory languishing.  People are backing out of deals and walking.  By end of 2023 builders will stop building.  Layoffs will happen.  Houses will start going back to the banks from builders.  The typical consumer can not afford a house and they have less every day for house due to the higher prices on everything.  They have to buy food, fuel, clothes, so rents will have to come down as well.  Which is what the feds want.  As they say in the stock market don't fight the feds.  Good luck to everybody even the ones that dislike my opinion.

I sell lots directly to homebuilders, and also build my own new construction homes. Even in the current market, I am seeing builders still easily making 8-10% plus margin on costs. Also, not one builder that I know has stopped buying lots, though all are of course more cautious.

Builders, and especially large regional and national homebuilders, do not use the same kind of financing as even most developers. These are generally large corporate structures or publicly traded companies that have the ability to raise debt and bond financing in the capital markets at or near short term lending levels, and for those that are especially creditworthy and have strong lending ties, they may even still be in the low 4's for construction interest rates (not unheard of, even in this market, for truly prime borrowers). Additionally, interest is typically only accrued on drawn capital so unless and until the home is fully complete it won't be accruing much carrying cost (land is hardly ever financed, and of the major builders only a handful engage in speculative building and would have finished houses without an end contract).

I really like when someone from inside the industry is demystifying what really happened compared to magazines like a fortune. 

[Harsh Thakker]

Quote from @Carlos Ptriawan:

Quote from @Harsh Thakker:

Quote from @Kevin Maher:

https://fortune.com/2022/12/28...   Please read this article in Fortune magazine.  It spells out the coming housing crash by the feds.  They fully intend to crash the housing market to fix inflation.  There is something that you don't see talked about that is in this article is the hidden unfinished house inventory.  These houses are typically listed by the time they pull a permit but they have been holding inventory back off the market since the 2020 at least in order to capture all the appreciation they can.  This will all be on the market in the next 3 to 4 months probably.  The carrying cost of construction has got to be killing the builders with inventory languishing.  People are backing out of deals and walking.  By end of 2023 builders will stop building.  Layoffs will happen.  Houses will start going back to the banks from builders.  The typical consumer can not afford a house and they have less every day for house due to the higher prices on everything.  They have to buy food, fuel, clothes, so rents will have to come down as well.  Which is what the feds want.  As they say in the stock market don't fight the feds.  Good luck to everybody even the ones that dislike my opinion.

I sell lots directly to homebuilders, and also build my own new construction homes. Even in the current market, I am seeing builders still easily making 8-10% plus margin on costs. Also, not one builder that I know has stopped buying lots, though all are of course more cautious.

Builders, and especially large regional and national homebuilders, do not use the same kind of financing as even most developers. These are generally large corporate structures or publicly traded companies that have the ability to raise debt and bond financing in the capital markets at or near short term lending levels, and for those that are especially creditworthy and have strong lending ties, they may even still be in the low 4's for construction interest rates (not unheard of, even in this market, for truly prime borrowers). Additionally, interest is typically only accrued on drawn capital so unless and until the home is fully complete it won't be accruing much carrying cost (land is hardly ever financed, and of the major builders only a handful engage in speculative building and would have finished houses without an end contract).

I really like when someone from inside the industry is demystifying what really happened compared to magazines like a fortune. 

 I mean, fortune is not wrong that prices are likely to drop. But their own article, says clearly, that the drop will just take us back to maybe 2021, or 2020 levels.

No builder worth their salt underwrites their deals expecting that trend to continue, and given the record margins of the past couple of years, even if it doesn't continue they are far from hurting. Now, those builders who are otherwise not financially healthy or managing their internal affairs appropriately might be taken out by a shock like this, but not any builder who played well the last couple of years.

[Carlos Ptriawan]

Quote from @Harsh Thakker:

Quote from @Carlos Ptriawan:

Quote from @Harsh Thakker:

Quote from @Kevin Maher:

https://fortune.com/2022/12/28...   Please read this article in Fortune magazine.  It spells out the coming housing crash by the feds.  They fully intend to crash the housing market to fix inflation.  There is something that you don't see talked about that is in this article is the hidden unfinished house inventory.  These houses are typically listed by the time they pull a permit but they have been holding inventory back off the market since the 2020 at least in order to capture all the appreciation they can.  This will all be on the market in the next 3 to 4 months probably.  The carrying cost of construction has got to be killing the builders with inventory languishing.  People are backing out of deals and walking.  By end of 2023 builders will stop building.  Layoffs will happen.  Houses will start going back to the banks from builders.  The typical consumer can not afford a house and they have less every day for house due to the higher prices on everything.  They have to buy food, fuel, clothes, so rents will have to come down as well.  Which is what the feds want.  As they say in the stock market don't fight the feds.  Good luck to everybody even the ones that dislike my opinion.

I sell lots directly to homebuilders, and also build my own new construction homes. Even in the current market, I am seeing builders still easily making 8-10% plus margin on costs. Also, not one builder that I know has stopped buying lots, though all are of course more cautious.

Builders, and especially large regional and national homebuilders, do not use the same kind of financing as even most developers. These are generally large corporate structures or publicly traded companies that have the ability to raise debt and bond financing in the capital markets at or near short term lending levels, and for those that are especially creditworthy and have strong lending ties, they may even still be in the low 4's for construction interest rates (not unheard of, even in this market, for truly prime borrowers). Additionally, interest is typically only accrued on drawn capital so unless and until the home is fully complete it won't be accruing much carrying cost (land is hardly ever financed, and of the major builders only a handful engage in speculative building and would have finished houses without an end contract).

I really like when someone from inside the industry is demystifying what really happened compared to magazines like a fortune. 

 I mean, fortune is not wrong that prices are likely to drop. But their own article, says clearly, that the drop will just take us back to maybe 2021, or 2020 levels.

No builder worth their salt underwrites their deals expecting that trend to continue, and given the record margins of the past couple of years, even if it doesn't continue they are far from hurting. Now, those builders who are otherwise not financially healthy or managing their internal affairs appropriately might be taken out by a shock like this, but not any builder who played well the last couple of years.

at the end of the day, the rate appreciation of houses would just follow money growth. Money growth is negative in 2022. First time in history.
In 2023 we will have a little bit more positive money growth. 

we already know, the housing price is only setback generally to Q4 2021/Q1 2022 level based on a price chart and it has nothing to worry about.
Once the bond market recovers more, indeed it already bounces beautifully, within 6-8 months we will go back to normal.

Even things like layoff,etc ; it's generally good news, as it started lowering the inflation and that's major indication that the fed would feel to stop raising the rates. the homebuilder is generally okay, I checked their number, because they are now delaying releasing their house to the public, so they have little bit of control over the market.

[Carlos Ptriawan]

Our current existing home liquidity is still 3.3 months; but the new home liqudity is 8 months. We also now that HB is delaying releasing their inventory to control the price.

During GFC , the new home and existing home liquidity are 9 months.  However, during 2005-2007, the rate of home appreciation nationwide is outpacing the growth of money supply, it's the very reason why it crash few later on.

In 2023, this spring would be the key, if our existing home remains negative from MoM perspective, we will have just flat or slow growth market.
Post 2023, almost everything would be back to normal except few sectors due to financing issue.

[Michael Wooldridge]

So been busy having a kid this month. Things settling into my “new norm” and finally looking at markets again. 

Things seem to be pretty much on track from what we were saying Sept. 50% less volume, low inventory, outside of select markets (or $2mill+) home values are flat.

On the job front layoffs continue but the one thing people should keep in mind is companies are annoying layoffs say 15-20% but many of them are only half that on elimination and the other half is restructuring too cheaper labor markets or lower cost employees. 

Not pretty but not bad and the ball continues to roll along….

[Greg R.]

@Michael Wooldridge @Carlos Ptriawan @John Carbone @Jay Hinrichs 

Gents, been out a couple months globe trotting (work). Have been almost completely unplugged... What did I miss?

[Greg R.]

Quote from @Greg R.:

@Michael Wooldridge @Carlos Ptriawan @John Carbone @Jay Hinrichs 

Gents, been out a couple months globe trotting (work). Have been almost completely unplugged... What did I miss?

 Forgot to tag @James Hamling... I could always use a good laugh

[Carlos Ptriawan]

Quote from @Greg R.:

Quote from @Greg R.:

@Michael Wooldridge @Carlos Ptriawan @John Carbone @Jay Hinrichs 

Gents, been out a couple months globe trotting (work). Have been almost completely unplugged... What did I miss?

 Forgot to tag @James Hamling... I could always use a good laugh

 I can't wait for him to comment as well .... lol

[Jay Hinrichs]

Quote from @Greg R.:

@Michael Wooldridge @Carlos Ptriawan @John Carbone @Jay Hinrichs 

Gents, been out a couple months globe trotting (work). Have been almost completely unplugged... What did I miss?

for us new builds were slow Q 4  But we sold 3 in the last week all for full ask no consessions  675k , 850k, 900k.  this is Canby Oregon.  Our out of state rentals are going well also record Q 3 and Q 4 and I did 4 payoffs this week so far.. And some of my guys/gals are starting to keep their deals instead of selling right now.. which makes sense since we are BRRR funders and they have lots of equity so they still cash flow very nicely at todays rates and if they want to put them back in thier inventory in a year or so they could go to cap gain instead of ordinary income and or 1031..   Our FLA new builds though have gone down 10% once i lowered them  I sold one this week and only have 2 left.. then will exit that market..  Sold a very nice flip in Augusta GA that closes on the 10th and it sold in less than 5 days full price.. so I guess it just all depends.

[Greg R.]

Quote from @Jay Hinrichs:

Quote from @Greg R.:

@Michael Wooldridge @Carlos Ptriawan @John Carbone @Jay Hinrichs 

Gents, been out a couple months globe trotting (work). Have been almost completely unplugged... What did I miss?

for us new builds were slow Q 4  But we sold 3 in the last week all for full ask no consessions  675k , 850k, 900k.  this is Canby Oregon.  Our out of state rentals are going well also record Q 3 and Q 4 and I did 4 payoffs this week so far.. And some of my guys/gals are starting to keep their deals instead of selling right now.. which makes sense since we are BRRR funders and they have lots of equity so they still cash flow very nicely at todays rates and if they want to put them back in thier inventory in a year or so they could go to cap gain instead of ordinary income and or 1031..   Our FLA new builds though have gone down 10% once i lowered them  I sold one this week and only have 2 left.. then will exit that market..  Sold a very nice flip in Augusta GA that closes on the 10th and it sold in less than 5 days full price.. so I guess it just all depends.

That's great news Jay. Very happy for you. 👍👍

[Carlos Ptriawan]

so update from me, there's this desktop automation software.
So here's what this software telling me.

Peak is at June 2022
Market is reaching -3% from Dec 2022 to Dec 2023
Bottom is Q4 2023, and the price going to reach the range of June 2022 somewhere around 2026.
This is for our local market though, meaning in 2023 is a quite good time to buy at the bottom before we sell it in 2026/2027.

[John Carbone]

Quote from @Carlos Ptriawan:

so update from me, there's this desktop automation software.
So here's what this software telling me.

Peak is at June 2022
Market is reaching -3% from Dec 2022 to Dec 2023
Bottom is Q4 2023, and the price going to reach the range of June 2022 somewhere around 2026.
This is for our local market though, meaning in 2023 is a quite good time to buy at the bottom before we sell it in 2026/2027.

This is market specific, but STR occupancy in Gatlinburg is way down this January, February, and March compared to the previous years. I anticipated this and had my pricing well enough to lock in these bookings back in the fall. More than half of my competitors have virtually 0 bookings for the next 3 months. Gatlinburg is the blue chip STR market. I don’t think it’s saturation either, 2022 was a phenomenal year for almost everyone. I think we have a tapped out consumer after Christmas, and people are worried about losing their jobs. This may be the canary in the coal mine moment.